12th | Retirement Of A Partner | Question No. 41 To 45 | Ts Grewal Solution 2023-2024

Rakesh retired from the firm. The amount due to him was determined at  ` 90,000. It was decided to pay the due amount as follows:
On the date of retirement −  ` 30,000
Balance in three yearly instalments − First two instalments being of  ` 26,000, including interest; and Balance amount as last instalment.
Interest was payable @ 10% p.a. Prepare retiring Partners' Loan Account.

 

Dr.	Rakesh’s Loan A/c					Cr.
Date	Particulars	(`)	Date	Particulars	(`)
Year I	To Bank A/c (20,000 + 6,000)	26,000	Year I	By Y’s Capital A/c	60,000
	To balance c/d	40,000
				By Interest on Loan A/c	6,000
				(60,000 × 10/100)
		66,000			66,000
Year II	To Bank A/c (22,000 + 4,000)	26,000	Year II	By balance b/d	40,000
	To balance c/d	18,000
				By Interest on Loan A/c	4,000
				(40,000 × 10/100)
		44,000			44,000
Year III	To Bank A/c (18,000 + 1,800)	19,800	Year III	By balance b/d	18,000
				By Interest on Loan A/c	1,800
				(18,000 × 10/100)
		19,800			19,800

 

Date	Particulars		L.F.	Dr. `	Cr. `
	B’s capital a/c	Dr.		4,050
	To Revaluation a/c				4,050
	(Being unrecorded furniture taken over by partner B)
	Revaluation a/c	Dr.		9,000
	To unrecorded liabilities a/c				9,000
	(Being remaining unrecorded Liabilities  paid by partner)
	B’s capital a/c	Dr.		1,650
	To Revaluation a/c				1,650
	(Being loss on revaluation debited to B’s capital)
	B’s capital a/c	Dr.		1,74,300
	To Bank a/c				1,74,300
	(Being final amount paid to B’s capital on his retirement by bank draft)
	Total			1,89,000	1,89,000

Harish, Paresh and Mahesh were three partners sharing profits and losses in the ratio of 5 :4: 1. Paresh retired on 31st March, 2022. His capital as on 1st April, 2021, was 80,000. During the year 2021-22, he withdrew 5,000. He was to be charged interest of 100 on drawings.

The Partnership Deed provides that on the retirement of a partner, he will be entitled to:

(i) His share of capital.

(ii) Interest on capital @10% per annum.

(iii) His share of profit in the year of retirement.

(iv) His share of goodwill of the firm.

(v) His share in the profit/loss on revaluation of assets and liabilities.

Additional Information:

(a) Paresh's share in the profit of the firm for the year 2021-22 was 20,000.

(b) Goodwill of the firm was valued at 24,000.

(c) The firm incurred loss of 12,000 on the revaluation of assets and liabilities.

(d) Paresh was to be paid?7,700 in cash and the balance was to be transferred to his Loan Account bearing interest@ 6% per annum. Loan was to be repaid in two equal annual instalments, the first instalment to be paid on 31st March, 2023.

You are required to prepare:

(i) Paresh's Capital Account.

(ii) Paresh's Loan Account till it is finally closed.

 

Paresh’s Capital A/c
Particulars	`	Particulars	`
Revaluation A/c	4,800	Balance b/d	80,000
Drawings	5,000	Interest on Capital	8,000
Interest on Drawing	100	P&L Appropriation A/c	20,000
Paresh’s Loan A/c	1,00,000	Harish’s Capital A/c	8,000
		Mahesh’s Capital A/c	1,600
	1,17,600		1,17,600

 

Paresh’s Loan A/c
Date	Particulars	`	Date	Particulars	`
31-3-22	Balance C/d	1,00,000	31-3-22	Paresh’s Capital A/c	1,00,000
31-3-23	Bank A/c	56,000	1-4-22	Balance b/d	1,00,000
31-3-23	Balance C/d	50,000	31-3-23	Interest on Loan A/c	6,000
		1,06,000			1,06,000
31-3-24	Bank A/c	53,000	1-4-23	Balance b/d	50,000
			31-3-24	Interest on Loan A/c	3,000
		53,000			53,000

 

X, Y and Z are partners in a firm sharing profits in the ratio of 3 : 2 : 1. On 1st April, 2009, Y retires from the firm. X and Z agree that the capital of the new firm shall be fixed at  ` 2,10,000 in the profit-sharing ratio. The Capital Accounts of X and Z after all adjustments on the date of retirement showed balance of  ` 1,45,000 and  ` 63,000 respectively. State the amount of actual cash to be brought in or to be paid to the partners. (AI 2020)

 

Old Ratio (X, Y, and Z) = 3 : 2 : 1

Y retires from the firm. 

∴New Ratio (X and Z) = 3 : 1 

Total capital of the New Firm = ` 2,10,000

X‘s new capital = 2,10,000×3/4=1,57,500

Z‘s new capital = 2,10,000×1/4=52,500

 

Ascertainment of Actual Cash to be brought in or to be paid to the partners

 

Particulars	X	Z
New Capital	1,57,500	52,500
Existing Capital	1,45,000	63,000
Cash Paid/Brought in	(12,500) (Brought in)	10,500 (Paid)

 

BALANCE SHEET OF LISA, MONIKA and NISHA as at 31st March, 2019
Liabilities		`	Assets	`
Trade Creditors		1,60,000	Land and Building	10,00,000
Bills Payable		2,44,000	Machinery	12,00,000
Employees' Provident Fund		76,000	Stock	10,00,000
Capitals:			Sundry Debtors	4,00,000
Lisa 14,00,000	14,00,000		Bank	40,000
Monika	3,60,000	31,60,000
Nisha
		36,40,000		36,40,000

On 31st March, 2019, Monika retired from the firm and the remaining partners decided to carry on the business. It was agreed that:

(I) Land and building be appreciated by `2,40,000 and machinery be depreciated by 10%

(ii) 50% of the stock was taken over by the retiring partner at book value.

(iii) Provision for doubtful debts was to be made at 5% on debtors

(iv) Goodwill of the firm be valued at `3,00,000 and Monika's share of goodwill be adjusted in the accounts of Lisa and Nisha.

(v) The total capital of the new firm be fixed at `27,00,000 which will be in the proportion of the new profit Sharing ratio of Lisa and Nisha. For this purpose, Current Accounts of the partners were to be opened.

Prepare Revaluation Account, Partners' Capital Accounts and the Balance Sheet of the reconstituted firm on Monika's retirement. (CBSE 2019)

 

Revaluation Account
Dr.						Cr.
Particulars		(`)	Particulars		(`)
To provision for doubtful debts		20,000	By land and building		2,40,000
To Machinery a/c		1,20,000
To capital a/c Lisa’s =1,00,000×2/5=40,000 Monika’s =1,00,000×2/5=40,000 Nisha’s =1,00,000×1/5=20,000 (In old ratio)		1,00,000
		2,40,000			2,40,000

 

Partners’ Capital Accounts
Dr.										Cr.
Particulars		Lisa	Monika	Nisha		Particulars			Lisa					Monika		Nisha
To Monika’s capital a/c To stock To Monika’s loan a/c To balance c/d		80,000     13,60,000	5,00,000 10,60,000	40,000     3,40,000		By Balance b/d By Lisa’s capital a/c By Nisha’s capital a/c By revaluation a/c			14,00,000     40,000					14,00,000 80,000 40,000 40,000		3,60,000     20,000
		14,40,000	15,60,000	3,80,000					14,40,000					15,60,000		3,80,000
To balance c/d		18,00,000		9,00,000		By Balance b/d By current a/c			13,60,000 4,40,000							3,40,000  5,60,000
		18,00,000		9,00,000					18,00,000							9,00,000

 

Balance Sheet as on April 01, 2019 after Monika’s retirement
Liabilities		(`)	Assets		(`)
Trade creditors Bills payables Employees provident fund Capital a/c Lisa= 18,00,000 Nisha= 9,00,000		1,60,000 2,44,000 76,000     27,00,000	Land and building Machinery Stock Sundry debtors     4,00,000 Less; Provision           20,000 for Doubtful debts Bank Lisa’s current a/c Nisha’s current a/c		12,40,000 10,80,000 5,00,000   3,80,000   40,000 4,40,000 5,60,000
Monika’s loan		10.,60,000
		42,40,000			42,40,000

Working notes;

WN -1

Calculation of gaining and sacrificing ratio

	Lisa		Monika		Nisha
Old ratio =	2	:	2	:	1
New ratio =	2		:		1

Gaining ratio = New ratio – Old ratio

Lisa’s gain = 2/3-2/5=10-6/15=4/15

Nisha’s gain = 1/3-1/5=5-3/15=2/15

Gaining ratio of Lisa and Nisha = 4:2=2:1

 

WN-2 Treatment of goodwill;

Firm’s goodwill =3,00,000

Monika will be compensated = 1,20,000×2/5=1,20,000

Lisa will compensate =1,20,000×2/3 = 80,000

Nisha will compensate =1,20,000×1/3 = 40,000

Condition for goodwill remaining partner to retiring partner

 

WN -3

Lisa’s capital = 27,00,000×2/3=18,00,000

Nisha’s capital = 27,00,000×1/3=9,00,000